Breaking: Powell reiterates Fed is well-positioned to wait to learn more about economy
According to testimony prepared for delivery at a hearing before the House Financial Services Committee on Tuesday, Federal Reserve (Fed) Chairman Jerome Powell will reiterate that increased tariffs are likely to push up inflation and weigh on economic activity.
Key takeaways from Fed Chairman Powell's testimony
"Well-positioned for the time being to wait to learn more about the likely course of the economy before adjusting policy."
"The Economy is solid despite elevated uncertainty."
"Near full employment, inflation somewhat above 2% target."
"Attentive to risks on both sides of Fed's mandate."
"Strong labor market has helped narrow demographic disparities in earnings, employment."
"Fed's obligation is to prevent one-time increase in price-level from becoming an ongoing inflation problem by keeping inflation expectations well-anchored."
"To meet that obligation, will balance employment and price stability mandates."
"Without price stability, cannot achieve long periods of strong labor market conditions."
Market reaction to Fed Chairman Powell's testimony
The US Dollar (USD) Index stays in the lower half of its daily range near 98.00, losing about 0.3% on the day.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.59% | -0.81% | -0.15% | -0.76% | -0.87% | -0.42% | |
| EUR | 0.25% | -0.37% | -0.57% | 0.10% | -0.50% | -1.05% | -0.16% | |
| GBP | 0.59% | 0.37% | -0.22% | 0.48% | -0.12% | -0.68% | 0.07% | |
| JPY | 0.81% | 0.57% | 0.22% | 0.67% | 0.01% | -0.10% | 0.27% | |
| CAD | 0.15% | -0.10% | -0.48% | -0.67% | -0.62% | -1.15% | -0.41% | |
| AUD | 0.76% | 0.50% | 0.12% | -0.01% | 0.62% | -0.55% | 0.21% | |
| NZD | 0.87% | 1.05% | 0.68% | 0.10% | 1.15% | 0.55% | 0.75% | |
| CHF | 0.42% | 0.16% | -0.07% | -0.27% | 0.41% | -0.21% | -0.75% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of Fed Chairman Powell's testimony at 10:00 GMT.
- Jerome Powell’s testimony in the US Congress will be a top-tier market-moving event this week.
- New clues on the Federal Reserve interest rate path are awaited.
- US Dollar, stock markets and other asset classes could see big swings with the Fed Chair’s words.
Jerome Powell, Chairman of the United States (US) Federal Reserve (Fed), will deliver the Semi-Annual Monetary Policy Report and testify before the US House Financial Services Committee on Tuesday. The hearing will start at 14:00 GMT and it will have the full attention of all financial market players.
Jerome Powell is expected to address the main takeaways of the Fed’s Semi-Annual Federal Reserve Monetary Policy Report, published last Friday. In that report, the Fed noted that there are some early signs suggesting that tariffs are pushing up inflation and reiterated that monetary policy is well-positioned for what lies ahead.
In a long Q&A session, House members are expected to ask Powell about the interest rate path, inflation developments, and the economic outlook. They are also very likely to inquire about how US President Donald Trump’s policies and the current geopolitical environment could influence prices, growth prospects and the monetary policy moving forward.
The CME FedWatch Tool shows that markets are currently pricing in about a 20% probability that the Fed will lower the policy rate by 25 basis points (bps) in July after maintaining its status quo at every meeting this year. The revised Summary of Economic Projections (SEP), published alongside the policy statement after the June meeting, showed that policymakers are still projecting two 25 basis points (bps) rate cuts in 2025 and a single rate cut in 2026, compared to two rate cuts marked down in March’s SEP.
In an interview with CNBC this past Friday, Fed Governor Christopher Waller said that the Fed is in a position to lower rates as early as July. Citing concerning signs in the labor market, such as a high unemployment rate among recent graduates and slower job creation, Waller argued that the Fed should not wait for the job market to crash before easing policy. Similarly, Fed Governor Michelle Bowman noted that she would be in favour of lowering the interest rate at the next meeting to align the policy more closely with its neutral setting and maintain a healthy labour market.
In case Powell notes that they will not have enough data to confirm a rate cut in July and reiterates that they need to remain patient, the market positioning suggests that the US Dollar (USD) could gather strength against its rivals in the immediate reaction. On the flip side, a significant USD selloff could be seen if Powell leaves the door open for a policy-easing step in July. Comments on the inflation outlook, especially with rising energy prices due to the escalating geopolitical tensions in the Middle East, could also drive the USD’s valuation.
About Jerome Powell (via Federalreserve.gov)
"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.